After the exchange rate of the dollar surpassed 40,000 Lebanese pounds last week and as banks prepared several of their ATMs for “Sayrafa” transactions while their doors remained closed, the Central Bank of Lebanon surprised the Lebanese yesterday, Sunday, by issuing a brief statement announcing that it would exclusively sell U.S. dollars through the “Sayrafa” platform starting Tuesday. It also stated that it would not buy dollars through SAYRAFA until further notice, based on Articles 75 and 83 of the Monetary and Credit Law.
The statement further indicated that it would continue, as per Circular No. 161, to pay public sector salaries in U.S. dollars. Additionally, the withdrawals of 400 dollars for account holders would continue, as well as the implementation of Circulars 151 and 158, which also allow for payments in U.S. dollars.
Immediately after the release of the Central Bank's statement, the exchange rate of the dollar plummeted from 40,500 pounds to 35,500 pounds within just a few minutes before rising again to 37,200 pounds. Thus, in a short time, it dropped by 3,300 pounds within mere minutes. This action recalls a previous decision made by the Central Bank last May, when it announced the commencement of the "Sayrafa" cash-to-cash operations, which were initially open before being reduced to 500 dollars and then to 400 dollars (two weeks ago). At that time, the dollar dropped by 10,000 pounds.
What are the reasons behind this rapid decrease in the dollar's exchange rate? The Central Bank had been purchasing dollars from the market daily from exchange and transfer institutions without intervening directly in the market by pumping the green currency and allowing the dollar to fluctuate freely. The policy of buying dollars, as learned by "Nida' al-Watan" from an informed source, was due to the need to finance state expenses in dollars, particularly salaries, wages, and social assistance for public sector employees, including military personnel and retirees, as well as support for certain medicines, wheat, and other state obligations without affecting the mandatory reserve. However, the amounts of dollars it acquired recently exceeded its needs to meet the requirement in the budget for a doubling of salaries. Hence, it decided to stop purchasing dollars and restrict its operations to selling them through "Sayrafa" until further notice.
According to the source, this measure "will increase the supply of dollars, which logically will lead to a decrease, but no one can predict how the market will move or the extent of the decrease that will be recorded. It cannot be confirmed that it will reach 30,000 pounds as is being promoted." However, the natural reaction of people to this decline will likely manifest today through a rush to exchange their dollars to benefit from the high price before it decreases further, which will amplify the decline in today’s trading.
Nevertheless, in light of the dollar's upward trajectory and the manipulation by speculators in the market, regardless of the increase in the supply of dollars, the exchange rate will not maintain its decrease for long. The source says that "the true decline of the dollar will not occur until fundamental reforms begin and a clear and fair plan for returning depositors' funds is established, alongside starting reform in agreement with the International Monetary Fund. This must also include the importance of electing a new president and restoring hope in order to regain confidence, which is fundamental to achieving a sustainable decrease in the dollar exchange rate."
As the dollar's exchange rate dropped, economic circles expected this to result in a decrease in the price of a gasoline canister, which is expected to be announced today at around 50,000 pounds. However, the prices of foodstuffs in supermarkets, which are determined by suppliers based on a high dollar exchange rate, such as 42,000 or 45,000 pounds to guarantee their profits if the exchange rate rises, will not see a decrease overnight or even within a week due to a lack of confidence in the stability of the exchange rate. Therefore, these circles emphasize the necessity of announcing food prices in supermarkets in U.S. dollars.
